Renovators’ Insurance: The Mother of All Oversights

Thursday, February 5th, 2015
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Renovating the family home as an owner builder is a great way to fulfill lifestyle improvements at wholesale rates. Approximately 38 per cent of owner building activities are improvements, extensions or addition to existing structures.

However, there is a little known but serious trap regarding insurance into which owner builders can fall if they are not careful.

It is customary in everyday home insurance wordings to exclude coverage when loss or damage is caused by water which enters the home through any tarpaulins or fixing setup while renovations are underway. Moreover, renovators are further exposed in everyday home insurance when renovation works exceed on average $50,000. Damage to existing property is one matter, but the overarching issue is one of public liability, third party personal liability and property loss or damage.

Because of this, a large number of owner builders opt to include existing structures under their construction insurance and either suspend or cancel their existing home insurance policy for the duration of the building works as a result.

Whilst this is generally sensible, caution should be adopted when taking this approach. Some owner builder construction insurance policies, for example, provide public and legal liability coverage for the (actual) building project related element of the home site and not the entire site. Others, meanwhile, exclude public and legal liability for non-building related activities, and yet others apply a condition that limits coverage to directly or partially related construction (building) works at the construction site.

What this means in such cases is that public and legal liability coverage only applies to the owner building portion of works. Frightfully, home insurance policies may simultaneously fail to respond for the remainder of the residential site, leaving the owner builder with effectively no public and legal liability coverage across the portion of the site outside of that with regard to which the works are taking place.

Because of this, owner builders should seek professional assistance to ensure policy wordings address key risk areas of public and legal liability across the entire residential site before they suspend or cancel their home insurance policy.

Securing the back door when the front door is wide open make little sense. Insurance is great, but only if it’s the right insurance. It’s all in the detail.

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